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IFAs beware the pitfalls of ScotEq bond

I write to warn fellow IFAs of the problems I have encountered with Scottish Equitable and its Security Plus bond.

My clients effected this contract in March 1998 and, in view of their need for caution, the 97.5 per cent guarantee contract was recommended. £15,000 was invested and, due to the fund&#39s non-performance, the value on switching to with-profits was £13,800. However,if you want to encash, the value would be £13,233.

This is primarily because of the 2.5 per cent loss per quarter but also because the cost of buying the option is greater than the guarantee.

My clients fully understand the risk involved in any investment. However, for the period of investment, they were never informed by the company how the fund was performing and what the current value of the policy was. If Scottish Equitable had provided this information, the fund switch would have been made long ago.

When challenged on this point, Scottish Equitable advises that it is not a PIA requirement to issue statements and that the IFA is responsible for monitoring performance. This is achieved in our practice by referring to the individual valuation statements prepared by companies for clients. Apparently, I am supposed to get monthly performance statistics from the company to do this. However, on checking with the company, our reports are addressed to a partner who retired a year ago and a consultant who left three years ago.

Scottish Equitable takes no responsibility for this and wrote direct to my client in an attempt to place blame at my door. I am no longer placing business with them, something I have never done before in over 20 years in his industry.

Therefore, you or your clients may be blissfully unaware that you are also in the same position. Around £32m is still invested in this fund although it is falling and,if clients are taking an income, the situation could be far worse.

If you do find yourself in this position, I suggest you also write to Scottish Equitable&#39s customer services department.

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19th November 20182:58 pm

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